Optus cable upgrade throws doubt on NBN

Now that Optus has followed the lead taken by Telstra in Melbourne and decided to upgrade its cable network, the government’s planned $43 billion national broadband network is even harder to justify commercially, according to Morgan Stanley.

Optus said last week that it would invest to boost the speeds on its cable network to 100 megabits per second - the same speed that the government wants the NBN Co to offer.

Telstra has spent $300 million in Melbourne already to do the same and Morgan Stanley analyst Mark Blackwell reckons Optus’s move will probably inspire the former monopoly to continue the roll - out elsewhere.

Telstra has put a further upgrade of its cable on hold for now while it negotiates over a possible deal to sell its other, much bigger domestic network - which is made of copper rather than cable - to the NBN Co.

Despite the ongoing uncertainty over those talks and the government’s legislative moves to break the company up, Blackwell still reckons investors should keep an overweight position in Telstra.

"The impact of the government’s planned national broadband network on Telstra’s fixed line business has been over-estimated,’’ he said.

"Telstra will continue to be the dominant fixed line carrier in Australia, whatever happens with the NBN and/orseparation.’’